Accounting profit and True Profit

996 Words4 Pages
In first part of the assignments, I have narrowly defined the term accounting profit, forming a technical discussion on the basic accruals concept and the literal difference between accounting profit and true profit. This was portrayed by Hines (1988) as simply ‘measuring the reality’ without questioning who created the reality. Throughout this module, I have developed awareness on the level of sovereignty held by the standards-setters who determine how accounting profit is calculated. Instead of focusing on accrual assumptions, this essay will examine the formulation and implementation of the Conceptual Framework as a whole. The idea of subjectivity in the adoption of accounting policies has also been extended to professional judgements of the regulators. Besides, accounting theories will be applied to shape a contextualised evaluation. For instance, through Critical Theory I begin to question the ‘truth’ initially imparted on me: how reliable is profit figure in financial statement? Two levels of compliance are involved in answering this question, namely compliance between regulators and ethical codes in standards-setting, and between managers and accounting standards. Central to the following discourse would be the money measurement assumption where accounting profit precludes non-monetary elements such as opportunity costs to ensure consistency with part one of the assignments. Reliability of accounting profit – Self-regulation via ethical codes Before being considered a measure of the true profit, reliability of profit figures shall be assessed. As highlighted above, regulators are powerful in a way that profit is ‘the outcome of applying particular accounting rules and conventions … when these rules change, the same series o... ... middle of paper ... ...urvey of ethical behavior in the accounting profession. Journal of Accounting Research, 9 (2), pp. 287-306. Olusegun Wallace, R. 1996. The Development of Accounting Research in the UK. In: Cooke, T. and Nobes, C. eds. 1997. The Development of Accounting in an International Context. London: Routledge, pp. 218-254. Parker, L. D. 1955. Practitioner perspectives on personal conduct. In: Cooke, T. and Nobes, C. eds. 1997. The Development of Accounting in an International Context. London: Routledge, pp. 68-89. Rodgers, P. 2007. International accounting standards. Oxford: CIMA. T.A., L. 1996. Richard Brown, Chartered accountant and Christian gentleman. In: Lee, T. eds. 1996. Shaping the Accountancy Profession: The Story of Three Scottish Pioneers. New York, Garland: pp. 153-221. Wagner, J. W. 2001. Defining Objectivity in Accounting. The Accounting Review July, pp. 599-605.
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